Timor Leste (East Timor) is eager to launch its first-ever onshore
exploration licensing round, but has a few hurdles to clear before that
happens.

The round would have been launched this year had it not been for the
country's civil upheavals in 2006.

The tiny South-East Asian nation has well-documented onshore oil and
gas seeps along its south coast, and these seeps have given it confidence
that an active petroleum system exists.

East Timor's exclusive territory is largely unexplored. This does not
include the offshore joint petroleum development area that it shares with
Australia.

Just one offshore well has been drilled in East Timor's exclusive
waters while 23 onshore holes were sunk before 1975, when all domestic oil
and gas operations stopped after the Indonesian invasion.

The onshore licensing round will be launched in 2008, hopefully early
in the year, said Amadio Soares, Director of the National Directorate for
Oil & Gas.

National elections are scheduled for later this month, and the new
government needs to pass certain legislation related to environmental,
community and land access issues before the round proceeds, said Soares.

Petroleum and fiscal laws are already in place, as is a tender
protocol. All were implemented before the country's successful first
offshore round in 2005 and 2006, when Eni and Reliance Industries were
awarded a total of six blocks.

"We're ready to roll out the (onshore) round," said Soares.
"But we have to wait till after the elections. The onshore round is a
priority for my department."

The bidding criteria will be slightly different to last year's offshore
round. Companies that wanted to be the operator on offshore blocks had to
pre-qualify on financial and technical grounds.

However, the onshore criteria will not be as stringent because there is
less technical complexity and cost, said Soares.

"We accept that the onshore is more suited to small and
medium-sized companies rather than the majors," he said.

No firm decisions have been made on the number or size of exploration
blocks to be released, but the current thinking is to limit, initially,
the amount of land offered so that the round is manageable for East
Timor's officials, said Soares.

"We are on a learning curve in terms of handling health, safety
and environment issues," he said.

Three areas along the south coast have been identified, but a bidding
strategy is not yet finalised. As for geological data, there is some
existing technical and commercial information that will be available for
purchase. The country has no plans to acquire seismic data before the
round.

East Timorese officials have claimed for years that the country's
petroleum geology is almost identical to what is found on Australia's
North West Shelf, which contains trillions of cubic feet of gas.

There are also indications of potentially large hydrocarbon resources
in limestone reservoirs, similar to what is seen in the Middle East, they
claim.

The onshore oil seeps contain very light crude, and are thought to
indicate deeper-lying oil pools derived from a petroleum system similar to
those found in the offshore zone shared with Australia, which contains a
number of fields, including Bayu-Undan and the two Sunset fields within
the Greater Sunrise complex.

The onshore areas are understood to have caught the attention of
explorers that have experience of working in the onshore Cooper and
Eromanga basins of central Australia.